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Unemployment and revolution part 2

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We
shall argue that conservative economists are correct to stress that
unemployment plays an essential regulatory role in a market economy.

This contrasts with the usual "left" calls for government action to "create jobs".But we will go on to show that "wage restraint" will not solve the problem either.

Such
"restraint" would be unnecessary to keep "normal" unemployment within
limits, because the unemployment itself would regulate wages.Something must have changed so that unemployment and wages are not regulated in the way they used to be.

A
common way to look at unemployment is that there is a certain fixed
number of jobs and a certain fixed number of people available to fill
them, and some sort of mismatch has occurred.The suggestion here is that the unemployed are simply those workers who cannot be fitted into the jobs available for them.This
idea leads to "commonsense" proposals to reduce the number of workers,
or provide a better match between specific workers and specific jobs.

Solutions aimed at restricting the number of job applicants have historically had a powerful appeal.Discrimination
against women, migrants, blacks and so on, can be in the immediate
interests of men, native born, or whites, in the competition for a
place at the front of the jobs queue.

Obviously
such "solutions" cannot reduce unemployment, but they can determine who
gets the jobs, and for the individual on the dole, that can be just as
important.Efforts are already being made to promote these objective divisions of interest within the working class.Those efforts are serious and should be fought seriously.They can succeed.

There
are always vacancies as well as people unemployed, so "solutions" which
emphasise re-training and so forth are still popular.So
is the idea that there are really plenty of jobs available, but "dole
bludgers" are just refusing to fit into them because they want
something better.

School
leavers do have access to advice about how to be well groomed for a
job interview and so on, although only cretins could imagine that if
all the unemployed were better groomed, any more of them would get jobs
quicker!This simply confirms that who gets the jobs is pretty important for the school leaver.Advice
about how to find a job can be somewhat helpful in evening out the
duration of unemployment and reducing the numbers who miss out on jobs
altogether.But quite obviously it cannot reduce unemployment.

A
lot of energy in left wing propaganda and agitation is spent trying to
combat the above ideas but without attacking the underlying concept
that there is a fixed number of jobs and workers. The "left-wing" and "right-wing" analyses are therefore just two sides of the same coin, sharing the same basic assumptions.

So we should not be surprised that the left makes no progress against the dominant right wing ideology.

What is the difference between saying there are too many workers or not enough jobs?

These really amount to exactly the same thing.Yet that is all the left does say.

The "not enough jobs" line is sterile, boring, and will get nowhere because it is just not true.

These ideas are wrong because neither the number of workers nor the number of jobs is at all rigid.

Under normal circumstances, the number of jobs adapts flexibly to the number of workers available to do them.In fact there is always plenty more work that needs doing, than the labour available to do it.

As capital is accumulated and society develops its productive forces, jobs that were previously left undone get attended to.

The limitation is always the social labour time available to do things, rather than the number of "jobs".

When
the number of jobs fails to adapt to the number of available workers,
this must mean that something has changed in the adaptive mechanism
itself, and we must find out what.Just trying
to "create jobs" would still leave us with an adaptive mechanism that
was not working and that could recreate a new pool of unemployed.

This
more sophisticated understanding of job creation in a market economy,
lies at the heart of conservative arguments for wage restraint.Those
arguments have never been satisfactorily answered from the labour
movement, and are gradually being accepted by the trade union
bureaucracy.

There is thus an urgent need for them to be answered.

Let us first consider how the adaptive mechanism is supposed to work.

The Labour Market

The workforce in modern industrial countries is extremely mobile.It
is the product of centuries of capitalist development in which the
technique and structure of production have changed so rapidly that
people expect to change jobs many times during their working lives.

Nowadays many firms are so large that a good deal of movement between jobs takes place within the same firm.Some even have regular career services with a defined system for recruitment, promotion and transfer.There is also a certain amount of transfer between firms, directly from one job to another.But a great deal of movement between jobs still takes place via the pool of unemployment.

"Labour Turnover" includes workers changing jobs while searching for a better situation.It
also includes the replacement of workers who have died or retired or
otherwise left the labour force, by new workers entering the labour
force for the first time.

These movements have no net effect on unemployment although many workers will pass through unemployment on their way betweenjobs, or on their way into the labour force.

In addition to this however, there is a continuous process of new jobs being created and old jobs being destroyed.This does have a net effect on employment, and therefore on unemployment, although the effect can be in either direction.

In existing establishments, expansion or contraction of demand will create new vacancies or produce redundancies.Changes
in demand may also result in new establishments being set up as an
industry expands, or old ones being closed down as it contracts.

New techniques will be introduced with expansion, or when it is time for old plant and equipment to be replaced.Old
techniques will be phased out with contraction, or when they have
become so obsolete that it is more profitable to introduce the new
technique immediately.

Investment in new production techniques requires a reorganisation of the labour process.Vacancies will be created for new positions that previously did not exist.Old staff positions no longer required will be abolished.Some workers will be transferred from old positions to new ones.Others will be retrenched, or not replaced when they leave.New workers, perhaps with different skills, will be recruited. New raw materials and components will replace those previously used.Work
previously done "in house" when the volume was lower and the need for
specialisation was less, will either be farmed out to new outside
contractors or subsidiary establishments set up for the purpose.

Generally the new technique is introduced to increase productivity.The new team of workers will be able to turn more of their "inputs" into "outputs" at a lower cost and using less labour.There
may be an increased demand for new inputs used by the new process, with
a decrease in demand for the old inputs used by the old process.This may produce some net effect on total employment in the suppliers (and in their suppliers...)

If
the output is relatively cheapened as productivity increases, then
there may be a further increase in demand, which will again increase
the demand for the products of the firms or departments that supply the
inputs.

Expansion
of markets is generally a consequence of relative cheapening through
increased productivity, and at the same time a condition for new
techniques to be introduced."The division of labour is determined by the extent of the market". Often
within the same establishment, there will simultaneously be expanding
demand which increases employment, and re-organisation that decreases
it.The total staff size may either grow or shrink as a result.

This sort of thing is happening all the time, and may not even be noticed as "labour saving technological change".Especially if the change only increases output with the same size workforce, instead of leading to redundancies.

However labour
productivity and the real gross national product per worker are able to
grow each year only because of these changes.Growth rates have been very high in the whole post-war period, because these changes have been taking place very rapidly.

The long term tendency has been for the total labour force to grow more rapidly than the population.Labour saving technological change has meant more output per worker together with more employment overall.However this simply implies the overall rate of economic growth has been faster than the rate of productivity increase.Any
particular change may result in either more or less total employment,
and there is no guarantee that changes in employment taking place
simultaneously throughout the economy will automatically balance each
other in any way.

Both changes in demand and changes in technique can produce a net change in total employment.If
there was no unemployment pool, there would be no leeway for changes in
total employment to occur as a result of job creation and destruction.There must be leeway, so there must be an unemployment pool.

But its size is another question.

The Unemployment Pool

As
well as the normal labour turnover, there is a continuous stream
pouring into the pool of unemployment as a result of positions that
have become redundant (whether their previous occupants were sacked, or
the position was just not filled when they left)..There is also a continuous stream emptying the pool of unemployment as a result of new vacancies that have been created.

In
fact there are a number of interconnected pools and streams for
different occupations, industries and localities. And these are also
interconnected with the pools of people in the education system or
otherwise not in the labour force as well as with the flows of migrants
to and from other countries.

The
effect of changing demand on the numbers of jobs available for people
of various skills and occupations in various localities, is reflected
in the filling and emptying of their unemployment pools.People
who cannot find a job in one pool are forced to transfer to another by
doing things such as changing their usual occupation or residence,
acquiring new skills that are more in demand, and so on.

The pools of people "not in the labour force" can also be forms of "hidden" or "latent" unemployment.Women
for example, are drawn into wage labour more extensively during periods
of peak labour shortage, and pushed back into "home duties" when
unemployment is growing.Likewise people may stay on at school longer, or retire earlier, as a result of unemployment.

On
a world-wide scale, the movement of people off the land and away from
petty production into industrial wage labour jobs is accelerated by
labour shortages.

This movement is retarded or even reversed during a depression.Thus
countries like Australia which normally absorb immigrants from
agricultural areas like southern Europe, will put up barriers to
immigration when there is unemployment at home. People left marginally employed, on or off the land in the agricultural areas are also part of the unemployment problem.

The
modern capitalist economy is very flexible and has a number of
mechanisms for adapting to changes in the level of economic activity
and consequent changes in the demand for labour.Thse
include adjustments in overtime hours worked, part-time and casual
employment, wage rates, labour turnover, work intensity, production
techniques and so so.

Only
when the other adjustment mechanisms have already been stretched
considerably, do substantial unemployment or labour shortages appear
directly.Both unemployment and labour shortages
are therefore signs of some relatively severe disproportion which must
be stretching things. Since
each firm hires and fires independently and plans its investment
program independently, there is no reason why at any given time the
total numbers pouring into the pool of unemployed should be equal to
the numbers drained out of it.

Some other mechanism must therefore maintain the balance.

After
all, why should the number of jobs created in the tertiary sector, just
happen to balance the number of jobs lost in manufacturing, plus the
additional numbers of women entering the labour force, and so on?

Nevertheless, these independent statistics did balance for many years, and we must find out why they did, before we can find out why they now do not.

As
will be explained later, the expansion and contraction of unemployment
is itself part of the mechanism that regulates the price of labour
power, the rate of profit and the balance between production,
consumption and investment.

There
just is not any government authority that can regulate the number of
new jobs being created, or the number of old jobs being destroyed each
year - and there cannot be such regulation in a market economy.

Therefore there is not any way that the government can directly determine the number of unemployed.

Changes in the Level of Unemployment

It
is difficult to separate job creation and destruction from other labour
turnover, and difficult to separate the effects of new technology from
expansion and contraction of demand.But labour turnover is very high, and some of it is the result of jobs being created and destroyed.

If
people change their jobs an average of once every four years, then the
number of job changes each year is equal to a quarter of the entire
workforce.

If
the average duration of unemployment is six months, then twice as many
people pass through unemployment each year on their way to a job (or on
their way out of the labour force due to discouragement), as the number
of unemployed at any given time.

Only
a small proportion of labour turnover needs to be due to job creation
and destruction, for any imbalance between the two to have a rapid
effect on net employment and unemployment.

One
would naturally tend to think that if all those who happen to be out of
work at the moment were to go abroad, or had jobs specially created for
them, then there would be no unemployment.But
the above analysis suggests that only a slight mismatch between the
numbers of jobs being created and destroyed, would very quickly
recreate a large pool of unemployed.Just to
keep the number of unemployed static, whether at twenty thousand or two
million, there would have to be perfect equality between the large
number of jobs being destroyed each year, and the large number being
created.

It
follows that one should not just think in terms of a match between the
numbers of jobs and workers, but also a match between the rates of job creation and destruction.

In
fact, when there is no dramatic continuing change in the level of
unemployment, there must be just such a nearly perfect match between
job creation and destruction.

How is it brought about?Why does not the number of unemployed fluctuate wildly, all the time?Only if we know how unemployment is normally regulated can we find out why that regulation is not working the same way now.